2019 (3) TMI 1364 - AT - Central Excise

CENVAT Credit - inputs - certain items which are brought into the factory by the appellant and cleared along with the final product which was exported to Vietnam - Held that - The very same issue has been analyzed in the appellant s own case M/S. KCP LTD. VERSUS COMMISSIONER OF GST & CENTRAL EXCISE, CHENNAI 2018 (12) TMI 845 - CESTAT CHENNAI and the Tribunal has held that the credit to be eligible. Credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues:
Eligibility of CENVAT credit on bought-out components for export.

Analysis:

The case involved the eligibility of CENVAT credit on bought-out components for export by M/s. The KCP Ltd., manufacturers and exporters of machinery and parts for the sugar and cement industry. The Department contended that as the bought-out components were not used or intended for use in manufacturing but were exported in the same form as procured, the appellants were not entitled to avail credit. Show cause notices were issued proposing recovery of CENVAT credit, interest, and penalty. The original authority confirmed the demand, interest, and imposed a penalty which was reduced on appeal. The main issue was whether the appellants could avail credit on bought-out items cleared along with the final product exported to Vietnam.

The appellant argued that they rightly availed CENVAT credit on bought-out items, cleared as parts of final products. They referred to the definition of 'inputs' and a previous Tribunal decision where similar credit was held to be eligible. The appellant's consultant highlighted that the bought-out items were integral to the final product exported and their value added to the assessable value. The Department supported the findings of the impugned order.

The Tribunal analyzed the issue in the appellant's previous case and held that the credit was eligible based on the Thermax Ltd. case precedent. The Tribunal noted that the goods were exported as a complete plant with both self-manufactured and bought-out items, all duty paid. The assemblage of goods for export included both categories, with their values included in the export price. The Tribunal referred to Board's clarification and amendments to Central Excise Rules, supporting the broader scope of Rule 16. Additionally, the Tribunal cited a Supreme Court judgment and a previous Tribunal decision to support the eligibility of bought-out items as inputs for the final product.

Consequently, following the precedent set in the appellant's previous case, the Tribunal found the disallowance of credit unjustified. The impugned order was set aside, and the appeals were allowed with consequential relief, if any.